Story by Omodele Adigun
Microfinance banks (MFBs) play a critical role in the survival of families during economic recession like the one currently being experienced in the country.
According to the CEO of Grooming Centre, an NGO, Dr. Godwin Nwabunka, this is done through inclusion-driven financial services and loans to small business holders.
Speaking at a press conference in Lagos recently, Nwabunka said the centre had given out 4.5 million micro-credit since its inception by operating simple transparency model and creating opportunities for females.
He said: “Microfinance institutions and banks become the most active parts during recession. You have to ensure that households survive. There has to be food on the table, children have to go schools, and there is a need for access to health and sanitation. They don’t understand recession. The micro enterprises at the bottom level of the pyramid need to ensure there is food on the table. By empowering those women, Microfinance sector becomes a safety net for ensuring the system doesn’t fail.”
In Bangladesh, Grameen Bank (GB), the first ever microfinance bank in the world , provides credit to the poorest of the poor in rural areas without any collateral. In fact, it runs a banking system based on mutual trust, accountability, participation and creativity. The bank believes that credit is a cost effective weapon to fight poverty.
Its founder, Professor Muhammad Yunus, reasoned that, if financial resources can be made available to the poor people on terms and conditions that are appropriate and reasonable, “these millions of small people with their millions of small pursuits can add up to create the biggest development wonder.”
As of December 2015, Grameen Bank had 8.81 million borrowers, 97 per cent of whom were women. With 2,568 branches, it provided services in 81,392 villages, covering more than 97 per cent of the total villages in Bangladesh.
In Nigeria, Microfinance banks also provide small loans or microcredit to individuals or groups. They also give entrepreneurs and organizations access to credit facilities for their businesses. They grant loans to individuals and small scale enterprises (SMEs), expected to be paid back in small installments. This gesture plays key roles in poverty alleviation, agricultural development, increase in small scale businesses and so on. If you are a business man or woman, a petty trader or an individual in need of financial assistance, micro-finance banks have a primary objective of giving credit facilities to applicants who fall into this category.
According to WealthResult.Com, the following are simple steps to getting a loan from most micro finance banks in the country.
Genuine reason or project
Microfinance banks will never loan you money for frivolities. If you want to get a loan from a microfinance bank, you must have a genuine reason for it. It could be for business purpose or personal development, as long as your purpose for applying for the loan is important.
Microfinance banks only grant loans that fall into the category of small and medium enterprises (SMEs). They are also into business, and no business wants to run into loss. Granting loans is a serious business. Therefore, whatever you need credit facility for, it must be serious business or an important project, with a guaranty that you will repay your debt.
The kind of credit facility that most microfinance banks grant are loans for business purposes, asset procurement, agriculture, educational purposes and loans for salary earners. No microfinance bank will give you loan if there is no money backed guaranty.
You can further facilitate access to loan from a microfinance bank by presenting a document in respect of your reason for applying for that loan. It could be in form of a document concerning a project you are working on, for which you need financial assistance.
For instance, if you are a contractor needing financial assistance to complete a project for which you have been paid in part, in which you will not be given the balance of your payment until the project is completed, all you need to do is present the proposal for the contract, acceptance of your proposal, payment agreement and all other relevant documents. This will stand as a proof that your purpose for applying for the loan is genuine. It will also serve as a reference.
The first thing you will be asked to do when you go to apply for a loan in a microfinance bank is to open an account with the bank. This is to show that you are serious and you are willing to be committed to the bank. Service the account for a period of time by paying and withdrawing money from it constantly before you can be qualified to apply for a loan.This will help them to build trust in you. It will also assure the bank that you will repay the loan if it is granted.
Present collateral or documents
You also need to present a collateral when applying for a loan in a microfinance bank. This may not apply to small business loans for petty traders and individuals. In fact, some microfinance banks do not require collateral e.g Lift Above Poverty Level (LAPO).
But, it will be necessary for business loans that fall into the category of assets acquisition, agriculture and other loans of a larger amount.
Your collateral must equate the amount of loan you are applying for or supercede it, but it cannot be lesser in money value to the loaned amount.